Introduction

From 6 Jan 2014 Illness Benefit payment will not be made for the first six days of illness (up from three days). This means that a person will not be entitled to Illness Benefit for the first six days of their claim (unless the person was receiving Illness Benefit, Injury Benefit or a jobseekers' payment immediately before their claim). Claims with a commencement date before 6 Jan 2014 and those coming from Maternity Benefit will not be paid for the first three days of illness.

Illness Benefit is taxable. However, it is paid to the employee without any deduction of income tax. This is why Illness Benefit is put through the payroll - so that it can be correctly taxed.

There are two ways to set up Illness Benefit in Payback, either Quick Setup facility or Manually entering elements and deductions

Using Quick Set Up

Select the employee in the Employee screen.
Click the 'Quick Setup' button at the top of the screen.
Tick the 'Illness Benefit' tick box in the Quick Setup screen.
Select whether or not the employee kept the benefit amount (or if they handed the payment over to the company)
Enter the Benefit amount per pay period
Click 'Ok', then click 'Update employee'

Enter Illness Benefit directly into elements and deductions grids

Example One

Illness benefit of €188 where the employer keeps the social welfare cheque.

Description	Amount	Type	Tax	PRSI	USC
Illness	188	Illness	Y	N	N

You do not have to set up any deductions in this scenario. Enter an element in the Employee screen with the above settings. The social welfare amount should be paid back to the employee because the employer kept the cheque. Note that the Social Welfare amount has been taxed.

Example Two

Illness benefit of €188 where the employee keeps the social welfare cheque

In this example, we also need to make a deduction. This is because the Employee kept the social welfare cheque and no social welfare payment was handed over to the company. The Benefit amount is added as an element so that the correct tax can be applied. The Benefit amount is then taken off again because the company should not pay the benefit amount to the employee. (The employee has already received it). The Benefit amount is only appearing on the payslip for tax reasons.

Description	Amount	Type	Tax	PRSI	USC
Illness	188	Illness	Y	N	N

In this example, we also need to make a deduction. This is because the Employee kept the social welfare cheque and no social welfare payment was handed over to the company. The Benefit amount is added as an element so that the correct tax can be applied. The Benefit amount is then taken off again because the company should not pay the benefit amount to the employee. (The employee has already received it). The Benefit amount is only appearing on the payslip for tax reasons.

Description	EE Amount	Type	Tax	PRSI	USC
Illness	188	Illness	Y	Y	Y

How the calculations work

Adding and removing elements and deductions can be quite confusing. Sometimes it looks as if the employee is not be taxed or that there is no net effect. These two examples show how the employee is being taxed.

No Illness Benefit

Here is an example payslip for Sally Brown. For this example, we have given here a generous salary of €5000 a week. This is so that the illness benefit tax will be more apparent.

With Illness Benefit

For this payslip we have kept everything exactly the same as the last payslip. Then we add €1000 illness benefit. Note how the tax amount now changes.

First the illness benefit of €1000 is added (elements). Then the new taxable amount of €6000 is taxed. Finally the €1000 is taken back off of net pay (deductions)

The result is that the taxable amount as increased by €1000, but the net pay has gone down by the extra tax amount.

Note that PRSI and USC remain unchanged as there is no USC or PRSI liability for Illness Benefit.

Correcting Illness Benefit

If you have under paid illness benefit and the employee has not paid enough tax, increase the illness benefit amount to compensate. Note that you may have to get instruction from Revenue to do this as you will be making a deduction from wages.

If you have made an over payment of Illness benefit - the employee has paid too much tax - and need to correct it, here is how.

Pay Period Two No Illness

Here we have another of Sally's payslips. This is her second payment (week two). She has been paid €5000 for week one with no illness benefit and another €5000 for week two, again with no illness benefit.

Her Net pay is €2609 for this pay period (Total Net to Date is €5218)

Her Total Tax to date is €3676.54

Her Taxable Pay is €10000.00

Pay Period Two - Corrected

In this example Sally had €1000 set up for Illness Benefit in Pay Period one - like the 'With Illness Benefit' payslip above. However, now we find out that she should not have had the illness benefit in pay period one and it needs to be reversed in pay period two. The goal is to make the payslip the same as the 'Pay Period Two No Illness' Payslip above.

Her Net pay is €3009 for this pay period (Total Net to Date is €2209 + 3009 = €5218)

Her Total Tax to date is €3676.54

Her Taxable Pay is €10000.00

The total USC and PRSI also match the 'Pay Period Two No Illness' Payslip. The €1000 Illness benefit for Period one has been reversed.

How the correction was made

Here is how the element and deduction was set up to reverse the Illness Benefit. Note that it is opposite way to the way the Illness Benefit was initially set up in pay period one.

Element

Description	Amount	Type	Tax	PRSI	USC
Illness	1000	Illness	N	N	N

Deduction

Description	Amount	Type	Tax	PRSI	USC
Illness	1000	Illness	N	Y	Y

Entering Illness and Salary

When an employee gets illness benefit, Payback automatically zeros their salary. This is the most common scenario. Employees generally do not get paid Illness benefit and a full salary when they are off sick. However, if the employer wishes to pay a salary, or partial salary as well as the illness benefit, here is how:

Once off extra payment

If you want to make a once off payment in addition to Illness Benefit for the employee, this can be done in the Payroll screen. An example of why you might want to do this is if the employee was off sick for half a four week pay period.

Either:

In the Payroll screen, add a new element under the illness element for the extra amount

or:

Overwrite the zero salary amount with the desired amount

Salary amount for each pay period

If you are paying salary (or a portion of salary) for each pay period, in addition to the illness benefit, this can be set up as an extra element in the Employee screen, as shown opposite.

In this example the element is called 'Sick Pay'

Notes

If you use Quick Setup, a new element (and deduction if the employee kept the cheque) will be set up.
Information about Illness Benefit can be found here: http://www.welfare.ie/en/Pages/345_Illness-Benefit.aspx
If illness benefit is set up for Salaried employees, then any salary amount will be zeroed in the Payroll screen. This is the most common scenario.
Employees paid a basic rate will not have their hours or rate zeroed.

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